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| When a former mortgage executive lied to the Securities and Exchange Commission about divulging an upcoming merger to fellow employees, he started a process that would eventually leave him facing up to five years in prison.It was August of 2003 and the SEC was investigating charges of insider trading at LendingTree, which at the time was in merger talks with USA/InterActive Corp.
Regulators wanted to know if David Anderson, who was a senior vice president and general manager, told fellow employees that LendingTree was going to be acquired by USA. LendingTree was publicly traded, and divulging information about the pending merger would have been illegal. When employees Michael Ricks and John Woody asked him about the merger, Anderson told the SEC he would simply say “I don’t know,” according to federal court documents. But Anderson “fraudulently concealed from the SEC the fact that he had disclosed to Ricks and Woods material, nonpublic information regarding the acquisition of LendingTree,” according to documents filed by the U.S. Attorney’s office in Charlotte, N.C. Anderson has pleaded guilty to making false statements to the government and faces up to five years in prison and a $250,000 fine. He was indicted in April and charged with not only making false statements, but also tampering with a witness, obstruction of justice and conspiracy; he faced up to 45 years in jail and more than $1 million in fines. Anderson is one of five people who have pleaded guilty in the insider trading scandal involving USA’s $700 million purchase of LendingTree, which matches borrowers with lenders, mortgage brokers and Realtors through the Internet. Anderson was not accused of buying stock based on his inside knowledge. But he did pass it on to others who purchased thousands of shares of LendingTree stock and options “and subsequently realized illicit gains as a result,” federal prosecutors said in a statement. Prosecutors said four LendingTree employees have pleaded guilty to charges of trading stock based on insider information: Woody, Ricks, Mark Mead and Brian Paquette. Arthur Bartlett, who served as an outside attorney for LendingTree, also pleaded guilty to similar charges. Court documents shows that between February and May of 2003 LendingTree and USA were engaged in “confidential” merger negotiations. “Anderson was aware of these negotiations and was advised by LendingTree that the information concerning such was not to be disclosed to others,” prosecutors said. “Anderson, contrary to his duty of confidentiality, provided Ricks and Woody with information regarding the status of merger negotiations.” |
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Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer. |
